New Delhi:
The Treasury Department has exempted domestic airlines operating international flights from an 11 percent base tax on ATF or jet fuel purchased from oil marketing companies.
In a notification, the ministry said that ATF supplied as fuel to domestic airlines on international routes will continue to be exempt from basic duty from July 1.
Confusion arose over the levy of excise duties on domestic airlines for their foreign flights after the government imposed a special additional tax of Rs 6 per liter (SAED) or excise duty on the export of jet fuel on July 1.
Oil companies believed that with the export duty levy, domestic carriers would have to pay an 11 percent base tax on the Aviation Turbine Fuel (ATF) they buy for operating overseas flights.
The Treasury Department’s clarification that excise duty would not apply to domestic airlines for foreign flights puts them back on the same level as foreign airlines whose fuel is exempt from excise duty under the Chicago Convention.
KPMG Tax Partner Abhishek Jain said: “The potential levy of excise duty on ATF supplies to a foreign flying aircraft has been proactively exempted by the government, with no excise duty (basic or special) applicable to such supplies.
“This adjustment to taxability as an existing pre-tax export tax is a very welcome move for the airline industry, especially against the backdrop of rising ATF costs,” added Jain.